“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in
the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
“In my decades of investing experience, I have not seen
such mindless and uninformed speculation as I have witnessed
recently. Indeed, in nominal dollar terms...it is far in excess of the
dot.com boom.” – Doug Cass.
“I never imagined that I would see the day that the
Chairman of the House Judiciary Committee would step forward to call for raw [Supreme]
court packing. It is a sign of our current political environment where rage
overwhelms reason.” - Professor Jonathan Turley, honorary Doctorate of Law from
John Marshall Law School for his contributions to civil liberties and the
public interest.
NEW HOME SALES (Reuters)
“New home sales dropped 5.9% to a seasonally adjusted
annual rate of 863,000 units last month...March’s sales pace was revised lower
to 917,000 units from the previously reported 1.021 million units.” Story
at...
CONSUMER CONFIDENCE (Conference Board)
“The Conference Board Consumer Confidence Index® held
steady in May, following a gain in April. The Index now stands at 117.2
(1985=100), down marginally from 117.5 in April. The Present Situation
Index—based on consumers’ assessment of current business and labor market
conditions—increased from 131.9 to 144.3. However, the Expectations Index—based
on consumers’ short-term outlook for income, business, and labor market
conditions—fell to 99.1 in May, down from 107.9 last month... “Consumers’
assessment of present-day conditions improved, suggesting economic growth
remains robust in Q2. However, consumers’ short-term optimism retreated,
prompted by expectations of decelerating growth and softening labor market
conditions in the months ahead. Consumers were also less upbeat this month
about their income prospects—a reflection, perhaps, of both rising inflation
expectations and a waning of further government support until expanded Child
Tax Credit payments begin reaching parents in July. Overall, consumers remain
optimistic, and confidence should remain resilient in the short term, as
vaccination rates climb, COVID-19 cases decline further, and the economy fully
reopens.” Press release at...
https://conference-board.org/data/consumerconfidence.cfm
COUNTING THE CHICKENS TWICE (Hussman Funds)
“Given that the market can go from extreme overvaluation
to undervaluation even over a small number of years, the long-term prospects of
the market could look vastly stronger even a couple of years from today. So
keep in mind that these statements all reflect the starting point of current valuation
extremes.
From this particular starting point, I expect that the
S&P 500 will go nowhere for something approaching 20 years.” – John
Hussman, PhD. Commentary at...
https://www.hussmanfunds.com/comment/mc210502/
PICKING UP PENNIES IN FRONT OF A STEAM ROLLER (Real
Investment Advice)
“Yes, given we are in a strongly trending bull market,
driven by massive amounts of exuberance and liquidity, I am going to
keep “picking up pennies in front of a steamroller.” Such is why we
overlay analysis to align expectations with reality. Implementing a solid
investment discipline and applying risk management leads to the achievement of
those expectations.
“Anyone who followed the numbers would have avoided
the disaster of the 1929 crash, the 1970s or the past lost decade on Wall Street. Why
didn’t more people do so? Doubtless, they all had their reasons. But I
wonder how many stayed fully invested because their brokers told them ‘You
can’t time the market.”‘ – Brett Arends
RIA Commentary at...
https://realinvestmentadvice.com/technically-speaking-picking-up-pennies-in-front-of-a-steamroller/
My cmt: Hopefully,
my numbers will help me avoid the next crash – it is coming; we just don’t know
when, although we might guess within the next year or two.
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website
as of 6:45pm Tuesday. US total case numbers are on the left axis; daily numbers
are on the right side of the graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped
about 0.2% to 4197.
-VIX rose about 2% to 18.84.
-The yield on the 10-year
Treasury dipped to 1.558%. (The Bond Ghouls are buying bonds.)
The daily sum of 20 Indicators
improved from -2 to +3 (a positive number is bullish; negatives are bearish);
the 10-day smoothed sum that smooths the daily fluctuations rose from -57 to -44
(These numbers sometimes change after I post the blog based on data that comes
in late.) Most of these indicators are short-term and many are trend following.
The Long Term NTSM indicator
ensemble remained HOLD. Price is Bullish; Volume, VIX, & Sentiment are
neutral.
2 topping indicators remain
bearish. They are:
-Breadth on the NYSE compared to the S&P 500 index is
bearish – the Index is too far ahead of stocks advancing on the NYSE.
-The S&P 500 is 12.2% above its 200-dMA (Sell point
is 12%.). This value was 15.9% above the 200-dMA when the 10% correction
occurred in Sep 2020.
These 2 have been negative for
a long time and investors haven’t been bothered. With the FED liquidity and the
Politicians providing stimulus checks, overbought conditions may continue.
I remain neutral on the stock market. Indicators are
reasonably flat; price action isn’t helping to sway me in either direction. It’s
a worry that the S&P 500 has gone nowhere in more than a month. Indicators
are not suggesting a pullback is coming, but indicators are not particularly
bullish, either.
The 5-10-20 Timer System remains
BUY since the 5-dEMA and 10-dEMA are both above the 20-dEMA. That’s a
reasonably good signal although it can be subject to whipsaw reversals.
I increased stock allocation
in the portfolio to a fully-invested, 50% in stocks. I am not super bullish,
but I am not bearish either so I felt 50% is a more reasonable allocation than
being under-invested. It may bite me, but hey, it’s all a game, right? I added the
XLB-Materials ETF. I had been looking at DOW Inc, but it currently has a possibly
bearish, head-and-shoulders pattern on its chart. The XLB ETF has earned as
much as DOW in the last 2-months and DOW is one of XLB’s top holdings, so I am getting
some exposure to DOW while adding diversification.
As of today, I am at a
conservative stock-allocation of 50% in stocks.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs
(Ranked Daily)
The top ranked ETF receives
100%. The rest are then ranked based on their momentum relative to the leading
ETF.
*For additional background on
the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
TODAY’S RANKING OF THE DOW 30
STOCKS (Ranked Daily)
Here’s the revised DOW 30 and
its momentum analysis. The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM
Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
TUESDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained NEUTRAL on the market.
Market Internals are a decent
trend-following analysis of current market action, but should not be used alone
for short term trading. They are usually right, but they are often late. They are most useful when they diverge from
the Index.
Using the Short-term indicator
in 2018 in SPY would have made a 5% gain instead of a 6% loss for buy-and-hold.
The methodology was Buy on a POSITIVE indication and Sell on a NEGATIVE
indication and stay out until the next POSITIVE indication. The back-test
included 13-buys and 13-sells, or a trade every 2-weeks on average.
As of 25 May, my
stock-allocation is about 50% invested in stocks.
You may wish to have a higher
or lower % invested in stocks depending on your risk tolerance. 50% is a
conservative position that I consider fully invested for most retirees. As a
retiree, 50% in the stock market is about fully invested for me – it is a
cautious and conservative number. If I feel very confident, I might go to 60%;
if a correction is deep enough, and I can call a bottom, 80% would not be out
of the question.
The markets have not
retested the lows on recent corrections and that left me under-invested on the
bounces. I will need to put less reliance on retests in the future.
